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Potential Salary Loss for Aaron Hernandez

I mentioned the other day how the Patriots are well protected from Aaron Hernandez’ legal woes from a financial standpoint but with troubles mounting and speculation running wild I wanted to explain in a bit more detail what can possibly happen to Hernandez in the event he is not available to the Patriots.

Does that mean anything? Not really. Salary guarantees protect a player from skill, injury, or salary cap termination. They don’t protect a player for release due to personal conduct. Per the CBA a player can be released for the following:

“You have engaged in personal conduct which, in the reasonable judgment of the Club, adversely affects or reflects on the Club.”

So if Hernandez has put himself in a situation where he becomes more than a person of interest and an actual suspect in murder investigation or admits some participation in a crime there should be an avenue to release Hernandez and avoid the payment of his 2013 and 2014 salaries. That being said I think it is unlikely that they would release him.

There is little to be gained by releasing Hernandez. He is only set to earn $3.223 million in cash over the next two years, most of which is tied to actually playing football. Even though the contract is guaranteed he still needs to be on an active roster in order to earn his Paragraph 5 salary and I believe his roster bonus, which in his rookie contract was tied to being on the active roster and seems to have rolled over to his new contract.

Players suspended do not earn their salary. If Hernandez is placed on the Reserve/Suspended list by the league the guarantees mean nothing. The league has the ability to suspend a player and declare him ineligible for conduct so the Patriots would get the same protection from paying guarantees by simply petitioning the NFL to suspend Hernandez rather than releasing him under the conduct clause.

It should be noted that Hernandez is a good football player and we have seen good players go to jail in the past or be accused of some serious crimes and teams stand by the players. Ray Lewis and Jamal Lewis of the Ravens both faced significant legal troubles and neither was removed from the team. Suspending a player allows the team to maintain his future rights and avoid payment of the contract. Cutting him does not maintain future rights.

So for every game that Hernandez fails to play due placement on Reserve/Suspended he will lose 1/17 of his base salary and $7,375 of a roster bonus in 2013, and 1/17 of his base salary in 2014. That is regardless of guarantees. The Patriots will receive immediate salary cap relief if suspended. Now we get to the bigger reason why the Patriots will keep Hernandez on the roster.

Signing Bonus Forfeiture

Under the new CBA, failure to perform the duties of your contract due to incarceration triggers a forfeitable breach allowing a team to recover signing bonus money that has been paid but unaccounted for on the salary cap. Hernandez received a $12.5 million dollar signing bonus in 2012, of which only $2.5 million has been accounted for. That leaves $10 million in potential forfeiture for the Patriots to reclaim if Hernandez does not report due to being jailed. If jailed this year he can also forfeit $50,000 of his signing bonus he received as a rookie in 2010.

As of today Hernandez is guilty of nothing. The media stories do not look good but media stories not looking good and actual guilt are two very different things. If New England released him today it would need to be for skill, injury, or cap reasons. Once they release him for those reasons he keeps his signing bonus money and the Patriots face an acceleration of $10 million against the salary cap spread out over 2013 and 2014. In no way does that benefit the Patriots.

If placed on the suspended list due to being jailed the Patriots will recover 1/17 of his yearly signing bonus allocation for each game he is unavailable to the team to play football. So each year the team will recover $2.5 million, a significantly higher number than the base salary in question for the 2013 and 2014 League Years. Even if he plays out the 2013 season and is then jailed in 2014 the Patriots would pay him $1.523 million in 2013 for the opportunity to win back $7.5 million in bonus money. So for their own financial purposes they need to stand by Hernandez to allow the process to play out.

The Patriots still have an actual payment of $3.25 million to be made to Hernandez on that signing bonus which is not due until 2014. If the Patriots chose to release him for conduct they would likely withhold that payment which would lead to the grievance process putting things in the hands of an arbitrator to decide what money is an is not owed to Hernandez and what money can be reclaimed. The process is straightforward if they allow the system to play out if they believe jail will occur.